Developed, developing countries and their subsidies

Mumbai, July 26 | Updated: Jul 27 2006, 05:30am hrs
As many as 21 developed countries spent almost $250 billion on subsidies, while all countries together spent over $300 billion. The arithmetic average ratio of subsidies to GDP is lower in developing than developed countries, but large variations of the ratio can be found in both country groups.

For a sample of 31 developing countries the average ratio of subsidies to GDP was 0.6%, while the comparable figure for a sample of 22 developed countries was 1.4%.

According to the WTOs 2006 trade report on subsidies, agricultural subsidies in OECD countries (domestic and export) show a downward trend. The reports release coincided with the crucial meeting of the six key trading nations -India, Brazil, Japan, the EU, the US and Australia - which failed in Geneva, as Washington remained adamant on its farm subsidies.

Governments extend subsidies to build infrastructure, help struggling industries or foster new ones, promote research, develop new knowledge, protect the environment, redistribute income and help poor consumers.

The available evidence suggests industrial subsidies are most pervasive in mining, coal, steel, forestry, fishing, shipbuilding and automotive sectors.

Comparable data on the incidence of subsidies in services sectors does not exist.

Incomplete evidence suggests support measures are concentrated in the transport, tourism, banking, telecommunications and audio-visual sectors.

The report notes that while trade growth was lower in 2005 (6.5%) than the preceding year (9%), it was still above the last decades average.